Federal court dismisses Trump administration's repeal of coal, oil valuation rule

(Reuters) - A federal court has struck down the Trump administration’s repeal of an Obama-era policy aimed at boosting revenue for taxpayers by changing how energy companies value sales of coal, oil and gas extracted from federal and tribal land.

FILE PHOTO: A natural gas flare on an oil well pad burns as the sun sets outside Watford City, North Dakota January 21, 2016. REUTERS/Andrew Cullen

The decision, which found the Interior Department’s repeal of the so-called valuation rule was “arbitrary and capricious”, was the latest blow to the Trump administration’s “energy dominance” agenda in the courts, where environmental groups and some states have challenged dozens of de-regulatory actions.

“Once again, the Trump Administration has been checked by the courts in its unlawful attempt to bend over backwards to please special interests at the expense of hardworking Americans,” California Attorney General Xavier Becerra said in a statement late on Friday.

Becerra said the district court ruling would result in $71 million a year more in royalties for U.S. taxpayers from companies that mine or drill on federal lands.

The Interior Department is currently reviewing the decision, agency spokeswoman Molly Block said on Monday. Interior and industry group interveners have 60 days to appeal the decision.

The valuation rule was proposed by former Interior Secretary Sally Jewell in 2016 to close a loophole that enabled companies to dodge royalty payments when mining on taxpayer-owned public land. It required energy companies to pay royalties on sales to the first unaffiliated customer, known as an arm’s-length sale, as the fuel moves to market.

A Reuters investigation found in 2012 that coal companies were using affiliated brokers to settle royalty payments on exports to Asia at much lower domestic prices.

In early 2017, former Interior Secretary Ryan Zinke announced the agency would move to repeal the rule, which he said increased costs for coal, oil and gas companies and hampered production on federal lands, “making us rely more and more on foreign imports of oil and gas.”

Zinke said the department’s royalty policy committee, formed in 2017 with advisers from energy companies and local governments, would propose alternatives to the rule.

Conservation groups last fall sued the Interior Department, accusing the committee being too heavily stacked with industry representatives.

In her decision on Friday, district court judge Saundra Brown said the Interior Department moved ahead with the repeal of the valuation rule without offering a reasoned justification for doing so under the federal Administrative Procedures Act.

Reporting by Valerie Volcovici; Editing by Susan Thomas